The Pension Protection Fund (Entry Rules) Regulations 2005

Schemes which are not eligible schemes

2.—(1) For the purposes of section 126(1)(b) of the Act (eligible schemes), an occupational pension scheme is not an eligible scheme if it is—

(a) a public service pension scheme under the provisions of which there is no requirement for assets related to the intended rate or amount of benefit under the scheme to be set aside in advance (disregarding requirements relating to additional voluntary contributions);

(b) a scheme which is made under section 7 of the Superannuation Act 1972(1) (superannuation of persons employed in local government service etc) which provides pensions to persons employed in local government service;

(c) a scheme which is made under section 2 of the Parliamentary and Other Pensions Act 1987(2) (power to provide for pensions for Members of the House of Commons etc);

(d) a scheme in respect of which a relevant public authority has given a guarantee or made any other arrangements for the purposes of securing that the assets of the scheme are sufficient to meet its liabilities;

(e) a scheme which is not a tax approved scheme;

(f) a scheme which provides relevant benefits within the meaning of section 612(1) of the 1988 Act (interpretation) but which is not a relevant statutory scheme within the meaning of section 611A of that Act(3) (definition of relevant statutory scheme);

(g) a scheme—

(i) which has been categorised by the Commissioners of the Board of Inland Revenue for the purposes of its approval as a centralised scheme for non-associated employers;

(ii) which is not contracted-out; and

(iii) under the provisions of which the only benefits that may be provided on or after retirement (other than money purchase benefits derived from the payment of voluntary contributions by any person) are lump sum benefits which are not calculated by reference to a member’s salary;

(h) a scheme—

(i) the only benefits provided by which (other than money purchase benefits) are death benefits, and

(ii) under the provisions of which no member has accrued rights (other than rights to money purchase benefits);

(i) a scheme with such a superannuation fund as is mentioned in section 615(6) of the 1998 Act(4) (exemption from tax in respect of certain pensions);

(j) a scheme which does not have its main place of administration registered in the United Kingdom;

(k) a scheme with fewer than two members;

(l) a scheme with fewer than twelve members where all the members are trustees of the scheme and either—

(i) the rules of the scheme provide that all decisions are made only by the trustees who are members of the scheme by unanimous agreement; or

(ii) the scheme has a trustee who is independent in relation to the scheme for the purposes of section 23 of the 1995 Act(5) (power to appoint independent trustees) and is registered in the register maintained by the Authority in accordance with regulations made under subsection (4) of that section;

(m) a scheme with fewer than twelve members where all the members are directors of a company which is the sole trustee of the scheme and either—

(i) the rules of the scheme provide that all decisions are made only by members of the scheme by unanimous agreement; or

(ii) one of the directors of the company is independent in relation to the scheme for the purposes of section 23 of the 1995 Act and is registered in the register maintained by the Authority in accordance with regulations made under subsection (4) of that section;

(n) the Chatsworth Settlement Estate Pension Scheme;

(o) the scheme established by the Salvation Army Act 1963(6); and

(p) a scheme which, on or after the day appointed for the purposes of section 126(2) of the Act(7), does not have an employer in relation to the scheme and which has not been authorised under section 153 of the Act (closed schemes) to continue as a closed scheme.

(2) Except as otherwise provided in paragraphs (4) and (5) of this regulation, an occupational pension scheme which would be an eligible scheme but for this paragraph is not an eligible scheme where, at any time, the trustees or managers of the scheme enter into a legally enforceable agreement with an employer in relation to the scheme the effect of which is to reduce the amount of any debt due to the scheme from that employer under section 75 of the 1995 Act which may be recovered by, or on behalf of, those trustees or managers.

(3) Paragraph (2) shall not apply where—

(a) before the beginning of an assessment period—

(i) the trustees or managers of the scheme enter into a legally enforceable agreement with an employer in relation to the scheme the effect of which is to reduce the amount of the debt due to the scheme from that employer under section 75(2) of the 1995 Act which may be recovered by, or on behalf of, those trustees or managers;

(ii) the value of the scheme’s assets would be sufficient to secure benefits for or in respect of members of the scheme which correspond to the amount of compensation which would be payable in relation to the scheme in accordance with the pension compensation provisions if the Board were to assume responsibility for the scheme in accordance with Chapter 3 of Part 2 of the Act (pension protection);

(iii) an individual appointed to act as the actuary in relation to the scheme (“the actuary”) has provided the Board with a written estimate of the current value of the assets and the protected liabilities of the scheme together with a statement about the effect which the agreement would have on the value of the scheme’s assets as recorded in that estimate; and

(iv) the Board has determined to validate the estimate and statement provided;

(b) before the beginning of an assessment period, the trustees or managers of the scheme enter into a legally enforceable agreement with an employer in relation to the scheme, as part of an arrangement under section 425 of the Companies Act 1985(8) (power of company to compromise with creditors or members), the effect of which is to reduce the amount of the debt due to the scheme from that employer under section 75(2) of the 1995 Act which may be recovered by, or on behalf of, those trustees or managers; or

(c) after the beginning of an assessment period, or a further assessment period(9), the Board is acting as creditor of an employer in relation to the scheme under section 137 of the Act (Board to act as creditor of the employer) and has entered into a legally enforceable agreement with that employer on behalf of the trustees or managers of the scheme the effect of which is to reduce the amount of the debt due to the scheme from that employer under section 75(4) of the 1995 Act which may be recovered by, or on behalf of, those trustees or managers.

(4) Paragraph (2) above shall also not apply in relation to an eligible scheme where, before the beginning of an assessment period in relation to the scheme, a prescribed arrangement is in place pursuant to regulations made under section 75A of the 1995 Act(10) (debt due from the employer in the case of multi-employer schemes).

(5) Where the Board has determined to validate or not to validate an estimate and statement provided to it by the actuary under paragraph (3)(a)(iii), it must issue a notice to this effect (“a validation notice”) and must give a copy of that notice to—

(a) the trustees or managers of the scheme,

(b) the actuary,

(c) the insolvency practitioner in relation to the employer in relation to the scheme, and

(d) the Regulator.

(6) A notice issued by the Board under paragraph (5) shall be in writing and shall contain the following information—

(a) the name or type of the notice issued;

(b) the date on which the notice is issued;

(c) the date on which the Board received the estimate and statement from the actuary;

(d) the Board’s determination to validate or not to validate the estimate and statement received from the actuary;

(e) a statement of reasons for the Board’s determination;

(f) the address for communications at which the Board may be contacted in connection with the issue of the notice;

(g) whether the issue of the notice by the Board is a reviewable matter and, if so, the time limit for applying for a review of or appeal against the issue of the notice;

(h) the date on which the notice issued will become binding; and

(i) whether or not the notice issued contains any restricted information and, if so, the nature of the restrictions.

(7) The Board’s determination to validate or not to validate the estimate and statement provided to it by the actuary under paragraph (3)(a)(iii) above does not take effect—

(a) until—

(i) the Board has issued a notice under paragraph (5) relating to the determination, and

(ii) the period within which the issue of that notice may be reviewed by virtue of Chapter 6 of Part 2 of the Act (reviews, appeals and maladministration) has expired, and

(b) if the issue of the notice was so reviewed, until—

(i) the review and any reconsideration,

(ii) any reference to the PPF Ombudsman in respect of the issue of the notice, and

(iii) any appeal against his determination or directions,

has been finally disposed of.

(8) In this regulation, “PPF Ombudsman” has the meaning given in section 209 of the Act (the Ombudsman for the Board of the Pension Protection Fund).

(1)

1972 c. 11.

(2)

1987 c. 45.

(3)

Section 611A of the Income and Corporation Taxes Act 1988 was inserted by section 75 of, and paragraphs 1, 15 and 18(1) of Part 1 of Schedule 6 to, the Finance Act 1988 (c. 36).

(4)

Section 615(6) of the Income and Corporation Taxes Act 1988 has effect in relation to trust based occupational pension schemes established in respect of persons wholly employed in a trade or undertaking outside of the United Kingdom.

(5)

Section 23 of the 1995 Act is substituted by section 36(3) of the Pensions Act 2004.

(6)

1963 c. xxxii.

(7)

See Article 2 of the Pension Protection Fund (Eligible Schemes) Appointed Day Order 2005 (S.I. 2005/599) which provides that the day appointed is 6th April 2005.

(8)

1985 c. 6. Section 425 was amended by section 248(3) of, and paragraphs 3 and 5 of Schedule 17 to, the Enterprise Act 2002 (c. 40).

(9)

See section 159 of the Pensions Act 2004 which makes provision in respect of further assessment periods in respect of schemes which are authorised under section 153 of that Act to continue as closed schemes.

(10)

Section 75A of the Pensions Act 1995 is inserted by section 272 of the Pensions Act 2004.